There is a need for a small grey area in any system to stay sane, where people can workaround the limitations of said system.
Yes, it will be abused, and also used for nefarious purposes. But it's better than the alternative.
You need people to sometimes be able to do things the state doesn't approve. You need children to be able to mess around without parent knowing. You need to be able to go to a gay bar without living a trace. You need to be able to give cash to a homeless without him being part of the system.
Also if you make it very hard to try new things that are illegal or immoral now, your society will get stuck and lose a lot of opportunities to evolve.
Yes, it would be better to change the system to make it better first. But it's a slow and unreliable process, especially if you can't prove that your way is ok. So having little pocket of experimentation is important, and cash allows that.